Holt says province could scrap price-setting law on gas

The 'carbon cost adjustor' requires the EUB to let gasoline producers pass on the cost of federal clean fuel standards to consumers via the board’s mechanism. (Kirk Fraser/CBC - image credit)
The 'carbon cost adjustor' requires the EUB to let gasoline producers pass on the cost of federal clean fuel standards to consumers via the board’s mechanism. (Kirk Fraser/CBC - image credit)

Premier Susan Holt has raised the possibility of eliminating the regulation of retail gas prices in New Brunswick as a way to drive down the cost to consumers.

Holt brought up the idea while responding to criticism from Opposition Leader Glen Savoie that the elimination of the so-called "carbon cost adjustor" — saving consumers four cents a litre on gas — might have unintended consequences.

In 2022, the adjustor became part of the price-setting formula used by the Energy and Utilities Board to set the maximum price of gas every week.

It requires the board to let gasoline producers pass on the cost of federal clean fuel standards to consumers via the board's mechanism. That cost is 4.6 cents per litre this week.

Holt said last Thursday the EUB may have other ways to force consumers to keep paying that cost and suggested it may be better to scrap the provincial price-setting system altogether.

"It's certainly a possibility. We want to look at whether it's serving New Brunswickers," Holt said.

"And I think right now the first-glance data we have doesn't suggest that it's keeping the prices any lower, [or is] any more beneficial to New Brunswickers than jurisdictions that have an unregulated fuel price, because competition drives that."

WATCH |'We don't know how they're going to act': new gas price questions:

Holt said most gas retailers tend to set their prices at or near the weekly maximum set by the board, and eliminating the regulation would create a more competitive marketplace.

"Removing the regulation means that retailers start to compete for our business, and that may see a drive to a lower price than we see today," she said.

But there's no guarantee that would happen, and Holt acknowledged scrapping price regulation altogether would "potentially" let producers resume passing the cost of the federal fuel standards on to consumers through the supply chain.

However, she said the more likely outcome would be free-market pressures driving retailers to lower their prices.

Holt's predecessor, Progressive Conservative Blaine Higgs, said in May his government was reviewing whether to scrap the price-setting law, called the Petroleum Products Pricing Act.

At the time, Holt responded that the discussion should not happen "behind closed doors" and should involve the public.

"They should be able to see what's being said, what's being suggested, and they should be able to weigh in on alternatives or options," she said in June.

Susan Holt.
Susan Holt.

Premier Susan Holt has raised the possibility of eliminating the regulation of retail gas prices in New Brunswick as a way to drive down the cost to consumers. (Jacques Poitras/CBC)

Holt's government introduced legislation last week to repeal the carbon adjustor, which was adopted by Higgs in 2022.

Savoie said in his official response to the Liberal speech from the throne that without the adjustor in place, producers will still pass the cost down the supply chain – but now it will hit small, locally-owned gas stations, endangering already thin profit margins.

"The retailers will not be able to deal with the pressure that's going to be caused by the changes the government is going to put into place. They're not going to be able to adapt," Savoie said, predicting some gas stations would close.

"It is going to cause some of those retailers to take that infrastructure out and say 'my business can no longer handle the loss.'"

Energy Minister René Legacy said last Wednesday the repeal of the adjustor will take effect as soon as the bill is passed, likely before Christmas, which should see the 4.5 cents per litre come off the price by the end of the year.

But Holt said the next day that the EUB has other mechanisms that could continue to pass the cost to consumers, and her government would need to see if it can stop that from happening.

"There's lots we can consider," she said. "We don't have all information we'd like from the EUB."

Opposition leader Glen Savoie says he didn't see 'any surprises' in the throne speech.
Opposition leader Glen Savoie says he didn't see 'any surprises' in the throne speech.

Opposition Leader Glen Savoie said in his official response to the Liberal speech from the throne that without the adjustor in place, producers will still pass the cost down the supply chain. But now it will hit small, locally-owned gas stations, endangering already thin profit margins. (Ed Hunter/CBC)

Asked if the government should have sorted that out before introducing the bill, the premier said that it was "sending [the issue] back to the EUB, and we don't know how they're going to act on it. It shouldn't, and it's not our hope that it works its way back to consumers."

She agreed with Savoie that it "absolutely" is a concern that some gas retailers could close with the adjustor gone.

"That's why there's work to be done with the EUB and with others, to see how they're going to react to this and what choices they'll make."

The Petroleum Products Pricing Act was adopted in 2006 and while it doesn't lead to cheaper gas, it smooths out dramatic fluctuations in the price at the pumps that can happen during swings in the commodities market.

The EUB uses a formula, based on a benchmark market price, to set the maximum price once a week, taking effect every Thursday at midnight.

Green Party Leader David Coon said Holt's bill repealing the carbon adjustor should have included language to ensure the EUB did not pass the clean-fuel costs to retailers and left them with producers.

"The EUB law can be amended by this legislature to give them the power to do that. This is the legislature. They're the government," Coon said.